It was a marriage proposal made in utility heaven: Progress Energy and Duke Energy joining to form the nation's biggest power company.
Then came the suspicions. Did Duke know everything it needed to about its partner-to-be? Was Progress holding back about its Florida nuclear troubles?
The marriage went forward last week, but with a major twist.
The merger agreement called for Bill Johnson, the head guy at Progress, to take over as CEO of the new Duke Energy. And on Monday, when the merger was completed, he did.
For not even a day.
Then the board forced him out.
Duke officials aren't saying what happened or why Johnson, so central to a merger 18 months in the planning, was hastily cast aside.
But critics quickly connected the dots. They pointed to Progress Energy's broken Crystal River nuclear plant and suggestions that Duke was unhappy to learn too late the extent of its troubles.
"It's got to be Crystal River," said Jim Warren, executive director of the watchdog group NC WARN, which opposed the merger. "It's got to be related to the fact that (Johnson) understated the problem."
So what does it mean for the future of the Crystal River plant?
More than ever, its days may be numbered.
• • •
Crystal River symbolized to many the stark difference between the two utilities. Duke Energy has a reputation for being well-managed; Progress, not so much.
Progress Florida customers pay the highest rates of any investor-owned utility in the state. A significant part of the Florida customers' bills relate to nuclear costs, though the utility has not — and will not — produce any nuclear power in the state for years.
"Good management is going to have to clean up this mess," said Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School.
"Duke is better than Progress," Cooper said. "They'll fire the people who need to be fired, cancel the projects that need to be canceled."
Johnson was among the first to go, replaced by the new board of directors as head of the merged company by Jim Rogers, who was chief executive of the pre-merger Duke.
Given the choice between Johnson and Rogers, even environmentalists who oppose nuclear pick Rogers as the better leader. If either one of the executives could resolve Florida's energy issues, they say Rogers is more likely to get the job done.
Rogers, they say, not only would look at nuclear, but would consider other energy sources and approaches that would prove better for customers.
"To bring that kind of forward-thinking to Florida is a real shift in posture," said Susan Glickman, a lobbyist for the environmental group the Southern Alliance for Clean Energy.
Arnie Gundersen, a nuclear engineer and consultant on utility matters, said Duke is better suited to resolve questions about Crystal River. Duke's executives, he said, "have more nuclear experience than Progress."
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• • •
Johnson had wanted to repair the Crystal River nuclear plant, despite the huge price tag. He had good reason.
Progress was seeking to extend Crystal River's nuclear license for 20 more years beyond its expiration date in 2016. The 36-year-old nuclear plant delivered low-cost power for Progress' 1.6 million Florida customers because it doesn't carry the debt that comes with building a new reactor.
In fall 2009, on Johnson's watch, the 42-inch-thick concrete containment building that surrounds Crystal River's nuclear reactor cracked during a maintenance and upgrade project to replace old steam generators. Progress' repair attempts just made things worse.
The plant has been down ever since.
The severity of the troubles at Crystal River didn't come to light until after Progress and Duke announced their plans to merge in January 2011. At that time, the utilities expected the plant to come back on line two months later.
Then last month, a secret study Duke conducted about Crystal River came to light. The study, which was to be presented to Duke's board during the week before the merger closed, was said to paint a more grave picture of Crystal River's problems.
Duke moved forward with the merger but cast Johnson aside.
For now, Duke has not yet decided on a course of action for Crystal River. But the plant's future was the first question investors had in the conference call following the merger.
"It's my judgment that we will be able to (find), hopefully by year end and at the least by the early part of next year, a resolution for Crystal River," Rogers responded.
Lynn Good, Duke's chief financial officer, added that the utility continues to work through engineering analysis and cost estimates as it discusses the project with the insurance company.
So far, the insurer, the Nuclear Electric Insurance Ltd., whose board includes Johnson, has balked at paying for repairs.
Without insurance coverage, repairs and related costs — which could exceed $2.5 billion — would all become the responsibility of Duke and its customers.
Besides the cost of the repair itself, the utility has been spending as much as $300 million a year in alternative energy since Crystal River went offline in 2009.
Decommissioning the plant would likely require construction of an alternative power source such as a natural gas plant, which would cost at least $1 billion plus fuel.
And because of a settlement agreement with the state, Duke faces a $100 million charge if it chooses to repair Crystal River but does not start the work by the end of the year.
• • •
Other factors complicate Duke's decisionmaking.
As it stands, Florida relies heavily on natural gas, and lawmakers and the utilities want to diversify the energy mix. Among possible alternatives, coal is too dirty and solar not yet politically and financially practical on that scale.
That leaves nuclear.
Duke is weighing investment in the V.C. Summer nuclear plant under construction in South Carolina as well as building a half-dozen other new nuclear reactors on its own.
Duke also inherits Progress' plan to build a twin reactor plant in Levy County, whose latest price tag was put at $24 billion. That would make it the most costly nuclear plant in U.S. history.
Mike Hughes, a Duke spokesman, said the utility will continue to pursue securing the license from the NRC for the Levy plant but has not decided whether to build it.
When Levy was first proposed, electricity demand was high and population growth in Florida was soaring.
At one time Progress gained "30,000 to 35,000 new customers every year," Hughes said. "That's a medium-size city every year."
But that demand disappeared during the recession.
"There's not an identified, immediate need for base load," Hughes said. "The variables change, and they changed dramatically in Florida. But we do believe that having a diverse mix of resources is very important, particularly in Florida."
That's because Florida is a peninsula and along most of its length does not have neighbors from which to readily draw power and fuel.
If Duke decides not to fix Crystal River, will it commit to building Levy?
If it builds Levy, will it have to abandon its other nuclear projects proposed for the Carolinas?
Even with the increased clout of the nation's largest utility, which has prompted 30 lenders to offer $6 billion in credit, it might not be enough to resolve Duke's nuclear issues in Florida.
"Taken as a whole, Progress and Duke are clearly overcommitted to new nuclear," said Peter Bradford, a former member of the U.S. Nuclear Regulatory Commission. "None of the projects make any economic sense in light of the energy picture that's prevailed. None of them ever made any economic sense.
"But the energy picture that has come into being since the summer of 2008 — much lower natural gas prices coupled with lower demand — has really made the risk picture much clearer."
Ivan Penn can be reached at email@example.com or (727) 892-2332.